Hotel search-platform Trivago (TRVG -1.92%) has mostly enjoyed a bullish run since its IPO late last year, but shares took a big hit on Friday after the company's second-quarter earnings release. Though Trivago's second quarter boasted more of the sharp year-over-year revenue growth that the company reported in its first quarter, rising advertising spend meant the travel company swung to a loss during the period. Here's a close look at the quarter's results.
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Trivago earnings: The raw numbers
|
Metrics |
Q2 2017 |
Q2 2016 |
Change |
|---|---|---|---|
|
Revenue |
298.3 euros ($354 million) |
179.0 million euros |
67% |
|
Net income (loss) |
(3.4 million euros) |
(49.9 million euros) |
46.5 million euros |
Data source: Trivago second-quarter financial results. Table source: Author.
Trivago's second-quarter revenue soared 67% year over year, only decelerating by 1 percentage point compared to the 68% growth Trivago posted in the first quarter of 2017. Further, Trivago's net loss improved on a year-over-year basis from a loss of 49.9 million euros in the year-ago quarter to a loss of 3.4 million euros in the second-quarter of 2017.
Notably, however, Trivago's bottom line worsened sequentially. In Trivago's first quarter of 2017, the travel company reported net income of 7.7 million euros on revenue of 268 million euros. In its second quarter, the travel company lost 3.4 million euros on revenue of 298 million euros.
Trivago's net loss was driven primarily by a 60% year-over-year increase in selling and marketing expenses. Sales and marketing costs during the quarter amounted to 96% of the quarter's revenue, up from 92% of revenue in the year-ago quarter and 88% in Trivago's first quarter of 2017.
Of its selling and marketing expenses, management said 94% were advertising expenses. The higher advertising spending was driven by higher advertising expenses across all of its regions.
Key highlights
- Qualified referrals during Q2 increased 59% year over year, to 196.4 million.
- Revenue per qualified referral increased 4% year over year during the quarter.
- Trivago's "Rest of World" geographic segment is the company's smallest region for referral revenue, but it is, by far, Trivago's fastest-growing market. Referral revenue in the region was up 137% year over year.
- Trivago's largest geography for referral revenue, developed Europe, saw a 45% year-over-year jump in referral revenue.
- Increasing 67% year over year, Trivago's Americas referral revenue is gaining on the company's developed Europe region. Americas referral revenue was 115.8 million euros -- just 4.8 million euros behind developed Europe.
What now?
Going forward, investors should expect Trivago's fast-growing revenue to decelerate. Management maintained its guidance for total 2017 revenue to increase 50% year over year, implying a deceleration in the second half of the year compared to growth in the first half of the year.
Management expects its 2017 EBITDA margin, adjusted for share-based compensation, to "slightly increase vs 2016."
